Market analyst: Rain makes grain

Ray Grabanski
Special to the Farm Forum
Columnist

Last week, the grain trade was sharply higher on the bullish USDA acreage report, with soybeans up $1.22 November contract for the week, and $1.30 for July. Corn traded up 60 cents, and spring wheat was 31-39 cents higher in Minneapolis.

This week is just the opposite, as rain over the July 4 weekend turned the whole world bearish in a heartbeat. The old saying is "Rain makes grain", and it's raining in the driest areas of the corn belt. So the market is down sharply, nearly limit down.  

It rained Tuesday in the dry northern states of North Dakota, South Dakota, Minnesota and Montana, where rain was truly needed — so prices are taking it on the chin. Traders may also be contemplating the USDA June acreage report as more bad information — after all, the March report was missing about 5 million acres.

The June report found a few million, and perhaps the U.S. Department of Agriculture will find another 3 million during acreage reporting? That is no longer a survey like the USDA's NASS numbers June 30 and March 30, but is the actual population of acres (or at least 90%+), so we don't have to rely on the USDA NASS survey guesses anymore. But we don't get that information until September/October, and released in bits and pieces — but at least it keeps the USDA guessers honest.  

The forecast has also turned wetter for the dry northern tier states of North Dakota, South Dakota, Minnesota, Iowa and Wisconsin with mostly above normal precipitation and below normal temperatures for the next few weeks (with the possible exception of northern North Dakota). So, weather forecasts are improving. If the forecast is right, these states may be able to salvage near normal corn crops, and even above normal soybean crops if it comes in the right portions to finish the year.  

The spring wheat crop may be different, even though it will benefit from improving weather now — it will not be a normal or even within 5% of normal yields. Instead, it's already a disaster of huge portions in spring wheat. We are likely to suffer 10% or larger drops in yields from trend spring wheat, with high abandonment as well. This is clearly a disaster year for spring wheat producers.  

The below normal temperatures for corn pollination across the corn belt the next few weeks will also be ideal. The southern half and eastern half of the corn belt (about 75% of the total corn belt) may have record large yields with adequate moisture and below normal temperatures all during the important part of the growing season. That could spell some trouble for corn and soybean prices, which have hung in there pretty well. But with the July 4 holiday now past, we are running out of time to hurt this crop — especially given a much improved forecast for the next two weeks. Perhaps it's time to put a fork in it — is the rally is done?

That is exactly what the market is suggesting, with prices taking it on the chin after what was a quite strong rally last week.

Ray Grabanski can be reached at raygrabanski@progressiveag.com.